Hrycenko (by His Legal Representative Hycenko) v Hrycenko (No 2)
[2021] FedCFamC2G 232
•29 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Hrycenko (by His Legal Representative Hycenko) v Hrycenko (No 2) [2021] FedCFamC2G 232
File number(s): MLG 2739 of 2020 Judgment of: JUDGE BURCHARDT Date of judgment: 29 October 2021 Catchwords: BANKRUPTCY – application for stay of sequestration order pursuant to s 52(3) of the Bankruptcy Act 1966 (Cth) – consideration of balance of convenience – short stay granted conditioned on compliance by bankrupt with his obligation to file his Statement of Affairs Legislation: Bankruptcy Act 1966 (Cth) Cases cited: Endresz v Australian Securities and Investments Commission (ASIC) [2014] FCA 1139
Mehajer v Weston (Trustee), in the matter of Mehajer [2018] FCA 608
Menzies v Paccar Financial Pty Ltd [2010] FCA 692
Re Wheeler and Reynolds (A Firm) Ex Parte: Douglas Anthony Kerr and Donald Oakley Louis Reynolds v Jeremy Brian Crowe and Merolyn Dawn Crowe [1988] FCA 381
Division: Division 2 General Federal Law Number of paragraphs: 18 Date of last submission/s: 29 October 2021 Date of hearing: 29 October 2021 Place: Dandenong Counsel for the Applicant: Mr Bevan Solicitor for the Applicant: Kennedy Guy Solicitors Counsel for the Respondent: Mr Evans QC Solicitor for the Respondent: NOH Legal Counsel for the Supporting Creditor: Mr Hager Solicitor for the Supporting Creditor: Keypoint Law ORDERS
MLG 2739 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF VICTOR HRYCENKO
BETWEEN: MR GEORGE HRYCENKO (BY HIS LEGAL REPRESENTATIVE NICHOLAS HYCENKO)
Applicant
AND: MR VICTOR HRYCENKO
Respondent
AND KEYPOINT LAW
Supporting Creditor
ORDER MADE BY:
JUDGE BURCHARDT
DATE OF ORDER:
29 OCTOBER 2021
THE COURT ORDERS THAT:
1.On condition that Victor Hrycenko lodge with the trustee in bankruptcy (“the trustee”) a statement of his affairs in conformity with section 54 of the Bankruptcy Act 1966 (Cth), pursuant to section 52(3) of the Bankruptcy Act 1966 (Cth), until 15 November 2021, the trustee in bankruptcy of Victor Hrycenko is restrained from taking steps in respect of the following proceedings:
(a)Supreme Court of Victoria proceeding no. S ECI 2021 00505;
(b)Supreme Court of Victoria proceeding no. S ECI 2021 00416;
(c)County Court of Victoria proceeding no. CI-19-00204;
(d)Any proceeding in respect of the property known as 31 Mount Martha Road, Mount Martha, Victoria (Vol. 8409 Fol. 916);
(e)Any proceeding in respect of the property known as 231 Old Cape Schanck Road, Boneo, Victoria (Vol. 10943 Fol. 991).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
REVISED FROM TRANSCRIPTJUDGE BURCHARDT
The matter before the Court is an application for a stay of 21 days made by Victor Hrycenko, pursuant to section 52, subsection 3 of the Bankruptcy Act 1966 (Cth). It relevantly provides that the Court may, if they think fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days. Proceeding is defined in section, as meaning a proceeding under the Act.
It has not been the subject of extensive authority, so far as I can see, in the relatively brief time that I’ve had to consider the matter, but in Re Wheeler and Reynolds (A Firm) Ex Parte: Douglas Anthony Kerr and Donald Oakley Louis Reynolds v Jeremy Brian Crowe and Merolyn Dawn Crowe [1988] FCA 381, Spender J observed at [23] to [24] (having noted that by section 5(1) a proceeding is defined a proceeding under the Act):
23.The issue of a bankruptcy notice is a proceeding under the Bankruptcy Act 1966. Part II of the Bankruptcy Rules 1966 has the heading 'PROCEEDINGS IN CONNEXION WITH BANKRUPTCY", and Division 1 of that Part deals with bankruptcy notices; rule 7 in that division is directed to the application for issue of a bankruptcy notice.
24.Although the registrar's act in issuing the notice is an administrative rather than a judicial act, it is nonetheless a proceeding as contemplated by s.307. It is a proceeding under the Act but is not a step in any proceeding in the court
That extract is not, of course, directly on point, but it seems to suggest to me that proceeding may be relatively broadly considered.
The Court’s power to deal with an application of this character was addressed by Beach J in Endresz v Australian Securities and Investments Commission (ASIC) [2014] FCA 1139. And at [7]-[11], Beach J observed:
[7]The form of the stays sought in the interlocutory applications are not well conceived.
[8]It is apparent from the provisions and operation of the Bankruptcy Act 1966 (Cth) (the Act) that it is inapposite to talk of a stay of a sequestration order as such. When a sequestration order is made, it takes immediate and automatic effect by force of the Act. There is an immediate vesting of property in the trustee in bankruptcy. Moreover, after-acquired property of the bankrupt vests as soon as it is acquired. See, generally, Nand v Fuji Xerox Australia Pty Ltd [2014] FCA 757 at [3] per Yates J. It is conceptually incoherent to contemplate a judicial stay order as being available to countermand automatic legislative operation where no question of invalidity is involved.
[9]In concept, one can only consider whether there should be a stay of any proceedings action or under a sequestration order, rather than a stay of the order itself. So much is made plain by the language of s 52(3) of the Act which uses the language of “stay all proceedings under a sequestration order“. I interpolate at this point that s 52(3) also has a time limit of 21 days. Nevertheless, in the Court’s appellate jurisdiction under r 36.08, such a time bar does not limit the Court’s power thereunder. A separate source of jurisdiction can be invoked, rather than that applicable under s 52(3).
[10]Further, reference should also be made to s 37(2)(a) of the Act, which provides that the Court does not have power to suspend the operation of a sequestration order.
[11]In summary, the Court only has power to stay proceedings or action under the sequestration order. The present interlocutory applications do not identify what proceedings or action ought to be stayed and why. They fail in limine on this aspect alone.
That set of observations was the subject of express approval by Lee J in Mehajer v Weston (Trustee), in the matter of Mehajer [2018] FCA 608. And, relevantly, at [9], Lee J observed, having referred to Endresz and the judgment made of Beach J, said:
As made plain by his Honour, the Court only has power to stay proceedings or action under the sequestration order. This is not a distinction without a difference and the matter was expressly raised during the course of argument. Despite this, the contention was maintained that I had power to stay the sequestration order. For reasons I have already explained, I reject this contention.
Now, I pause to observe that, of course, I am not being asked, at least on the face of it, to stay the sequestration order. The orders that the applicant seeks are that the trustee in bankruptcy be restrained from taking steps in respect of three proceedings and two properties. Here Victor seeks a stay of 21 days in respect of these proceedings and properties. And it is submitted he wishes to consider lodging an appeal. It is, of course, common course that Victor can appeal despite the sequestration order.
None of the three trials self-evidently themselves, are proceedings under the Bankruptcy Act. There are two in the Supreme Court of Victoria and one in the County Court of Victoria. However, an election by the trustee not to proceed would be at least arguably a proceeding or action under the Bankruptcy Act. Likewise, I assume in Victor’s favour that any action taken by the trustee in respect of the two properties could be a proceeding or action under the Act, although quite what the full extent of meaning of the phrase “proceedings” does not seem to me to have been considered in these terms, in any of the authorities referred to, certainly in Australian Bankruptcy Law & Practice now edited by McQuade and Gronow.
However, having said that, the principles applying to a stay are well established. And once again, I will return to the decision of Beach J in Endresz, where his Honour said at [13]-[16]:
[13]The principles upon which a stay may be granted are not in doubt.
[14]Rule 36.08 confers a broad discretion. Generally, there must be demonstrated “a reason or an appropriate case” to warrant the exercise of discretion in favour of granting a stay.
[15]More specifically, two questions must be considered.
[16]First, is there an arguable point on the proposed appeal or is there some “rational prospect of success” in relation to any of the grounds of appeal? Second, does the balance of convenience favour the grant of a stay?
I have omitted citations of authority.
Here, of course, no appeal has yet been prepared. Rather, Victor seeks to consider his position. There are some points that might be made. First, I was aware that Victor’s right to prosecute his actions would vest in his trustee if a sequestration order was made. Second, the force, so to speak, of Victor’s case is not assessable, save to the extent that I would observe in passing that the costs case he wishes to run springs, as I understand it, from an assessment of the matter made pursuant to the Supreme Court rules by the Costs Court, itself.
Next, if an appeal is lodged, self-evidently the Federal Court would be able to assess far better and more objectively than I, what the prospects of success would be. Self-evidently, in giving the Judgment that I did, I thought I had produced the right result. It will be for others to assess the force of any criticisms that are contained in an appeal. In the end, therefore, the first limb of the consideration is referred to by Beach J in Endresz, namely, the assessment of appeal simply is not available. And, of course, in the circumstances, that is not a matter for criticism of anyone. So it really becomes a matter of the balance of convenience.
Victor’s submission is that he does not want his rights interfered with. Victor has not pointed, to use the phrase in Endresz at [21] to “any precise actual or anticipated action or proceedings” that he wishes to restrain. Rather, he has an inchoate concern that in some fashion the trustee may seek to prejudicially alter his circumstances. The obvious things he must fear is that the trustee will elect to not proceed with the three of courses of action in the course and take steps to realise the properties.
I note that there is considerable ill-feeling between the two brothers, Victor and Nicholas, whom I should make it clear I only refer to by their first names because their surnames are almost identical. And, no doubt, that will inform at least, any interaction Nicholas may have with the trustee. But the trustee will be obliged to consider these matters, as I pointed out in my Judgment, in a bona fide way.
The matter is, in my view, relatively finely balanced, because conversely, there is no obvious significant prejudice in the relatively short delay that Victor seeks.
On balance, I am going to grant a stay until 15 November 2021 pursuant to section 52(3). Victor would have been notified yesterday, so his 14 days to file his statement of affairs will have elapsed by that time.
In my view, once again, on balance, it is appropriate to make an order conditional upon his compliance with his obligations pursuant to section 54 of the Act in respect of his statement of affairs.
The case to which Counsel for Nicholas referred me, namely, the matter of Menzies v Paccar Financial Pty Ltd [2010] FCA 692, operated under very different circumstances. There was an appeal, and the stay, therefore, had a much longer effect. Nonetheless, in my view, it will assist in the administration of the estate if it is made wholly clear to Victor that the stay he gets is conditional upon him doing what, admittedly, the law already requires him to do.
Accordingly, I will grant a stay in the terms sought in Victor’s draft minute. But as in Menzies, it will be conditional, and I will give you the form of words which will be included “on condition that Victor lodge with the trustee and bankruptcy, a statement of his affairs in conformity with section 54 of the Bankruptcy Act 1966.” So there will be the orders in terms of the minute proposed by Victor, subject to that condition.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Burchardt. Associate:
Dated: 5 November 2021
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